Apple May Go Back on Its Word to Combat Sinking Digital Sales

Despite the company's earlier plans, a new rumor says Apple may release a Spotify rival and an Android version of iTunes.

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Digital downloads may have killed the physical media star, but even the standard MP3 purchase isn't immune to the convenience and versatility of subscription-based streaming services. With the rise of Spotify, Rdio, and Beats Music -- which allow users to browse and stream an almost-limitless song catalog for a monthly fee -- many folks no longer see much use in having a digital copy of an album just sit on a hard drive somewhere.

And with digital downloads possibly going the way of the compact disc, Apple (NASDAQ:AAPL) may be planning a streaming rival to Spotify.

Billboard reports that, according to unnamed sources, Apple is mulling an expansion of its current iTunes Radio service to let users call up any song hosted by the iTunes Store in exchange for a monthly fee. Like Pandora (NYSE:P), Apple's ad-supported service as it exists today only allows users to choose virtual stations of similar-sounding music without much control over the playlist. With nearly 30 million songs on the iTunes servers, the largest of any online vendor, users will have no shortage of choices.

The plans are still very preliminary with one source from a major label describing this early process as the "what if stage."

"[Apple is] feeling out some people at labels on thoughts about transitioning its customers from iTunes proper to a streaming service," the source told Billboard. "So when you buy a song for $1.29, and you put it in your library, iTunes might send an e-mail pointing out that for a total of, say, $8 a month you can access that song plus all the music in the iTunes store."

Obviously, the folks over at iTunes are keeping mum about such plans, but there's no time like the present for Apple to consider launching a Spotify-like service.

A recent report from Nielsen SoundScan shows digital album sales -- where Apple rules over Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOG), and the like -- is down 13% in the US, while sales of digital tracks are down 11% from last year.

Meanwhile, the Recording Industry Association of America (RIAA) and the International Federation of the Phonographic Industry (IFPI) have reported that Spotify and company are enjoying very healthy subscription, advertising and licensing revenues -- to the tune of $1.4 billion. The reports confirm that while the streaming business is booming -- with revenues growing 51% worldwide -- downloads have slumped a little over 2%.

In a statement, IFPI CEO Frances Moore painted a rosy picture of the future of streaming services around the world.

"Revenues in most major markets have returned to growth," Moore said. "Streaming and subscription services are thriving. Consumers have a wider choice than ever before between different models and services. And digital music is moving into a clearly identifiable new phase as record companies, having licensed services across the world, now start to tap the enormous potential of emerging markets."

This move, however, doesn't fall in line with earlier plans for iTunes. Beats Electronic CEO Jimmy Iovine unsuccessfully tried to convince former Apple CEO Steve Jobs into branching iTunes off into a streaming subscription service. "I was always trying to push Steve into subscription. And he wasn't keen on it right away," Iovine said in an interview. "[Beats co-founder] Luke Wood and I spent about three years trying to talk him into it."

It's hard to deny where the industry is moving, and if Apple wants to stay competitive, it should move with it. And that may even entail throwing a bone to its chiefest opponent.

Sources have also indicated that Apple might design an official version of iTunes to run on Android. Industry execs have noticed the massive growth of Android's market share and point to its numbers as possibly impacting iTunes sales. But with an Android app and sales available on the top two indomitable mobile platforms, iTunes can distance itself from the digital download slump.

There's little question about how Steve Jobs would feel about an Android-compatible service, especially when he was quoted as saying he didn't "want to make Android users happy."

But sometimes you have to go back on your word in order stay competitive.